New Delhi, July 2: ONGC Ltd has lost the giant Kashagan oilfield to the Chinese after Kazakhstan blocked its $5-billion deal to buy US energy major ConocoPhillips’s stake in the Caspian Sea oilfield.
In November, ONGC Videsh, the overseas investment arm of ONGC, had struck a deal to buy ConocoPhillips’s 8.4 per cent stake in Kazakhstan’s biggest oilfield, Kashagan, for $5 billion.
Under Kazakh law, the Central Asian nation had the right of first refusal or pre-emption rights that allowed it an option to step in and buy the stake at the price agreed between the Indian firm and ConocoPhillips.
The Kazakh government has decided to exercise its right and acquire the stake held by ConocoPhillips, sources with direct knowledge of the development said.
The Central Asian country’s oil and gas ministry has informed ConocoPhillips that its national oil company KazMunaiGaz will buy the US oil company’s 8.4 per cent interest in the world's largest oil find in five decades for about $5 billion. This stake will then be sold to China National Petroleum Corp (CNPC) for a reported $5.3-5.4 billion.
Kashagan, a Caspian Sea field set to produce 370,000 barrels of oil a day, will start output by September, eight years later than initially planned and with costs nearing $48 billion, double the early estimates.
According to Kazakh law, the government has the right to buy any oil asset for sale in the country at the price agreed on by the buyer and seller.
While ONGC got the approval of the partners for the acquisition of ConocoPhillips’ stake at the end of January, the Kazakh government had time till July to approve the transaction.
Exxon Mobil, Royal Dutch Shell, Italy’s Eni, Total of France and KazMunaiGaz each hold 16.8 per cent of Kashagan. Japan’s Inpex Corp has 7.56 per cent.
India has lost at least $12.5 billion of deals to China in the past years.
CNPC beat India by agreeing to pay $4.18 billion in August 2005 for PetroKazakhstan, then China’s biggest overseas oil deal. A month later, CNPC again outbid ONGC in buying assets of Encana Corp in Ecuador for $1.42 billion.
In March 2010, ONGC lost out on acquisition of oil Block 1 and 3A in Uganda oilfields to China's Cnooc who offered $2.5 billion for the 50 per cent stake. In May 2011, ONGC lost a bid to buy Exxon Mobil Corp's 25 per cent stake in an Angolan oil field.